Lew Altfest (CEO of Alfest Personal Wealth Management) stated that the market was high and people were nervous. He said that although clients may be fearful, none are ready to leave. He said, “They don’t have the courage to get out.”

Doug Boneparth of Bone Fide Wealth stated, “You cannot really take much more risk as far as new dollars.” What are you planning to do? You should dump all of your large-caps investments and make an investment in all emerging market stocks. “No one’s doing that,” he stated. 

After thirteen years of a bullish market, Boneparth stated that “there’s limited room for growth” after an increase in volatility over the past year. Boneparth also suggested that the Fed printed more money and government stimulus to resolve the situation.

It doesn’t mean there won’t be market conditions that lead to substantial de-risking. But it does make sense for people who are taking the time to evaluate their portfolios. He said, “It has been an incredible ride and risk appetites are only increasing in the near future.”

Even if the wealthy are less enthusiastic buyers of stocks, they are buyers of goods, and the economy will do well — and corporate profits as part of it — as long as outside of stocks they continue buying everything at higher prices, Altfest said. He said it was more important to the economy and the market that people become tired of freely spending.  

Two years of market growth have been very encouraging in 2020/2021. Investors now need to understand the impact inflation has on their equity growth and whether they can expect slower near-term returns.

“Those are the two ingredients that set the scene: what more risk is there to be taken?” Boneparth stated.

Michael Sonnenfeldt (founder and Chairman of Tiger 21), an investment network for the rich, stated that “Skittishness” is evident at all meetings.

For the rich, inflation is not a immediate danger. Sonnenfeldt stated that even though inflation is at 6%, inflation will not affect your lifestyle if you have a net worth of $10 million. Inflation anxiety for the wealthy is different to what the more vulnerable people have about their food budgets, or purchasing a car. Sonnenfeldt explained that the reality that inflation could devalue their assets is not something that can be ignored. It makes it more difficult to evaluate inflation in relation to investments following a time when there has been an exceptional market.

He stated that “assets went up more this year than inflation, more than its eroding…but next year could see a double whammy where inflation grows and the market flats, then you are seeing an erosion in value.” There was no need to panic this year. Wealth preservers increased assets more quickly than the rate of inflation due to the Fed flood the market. He said that he didn’t know of many wealth preservationists who failed to outperform inflation in this year. 

Tom Wynn (director of research, Spectrem) said that people are still processing Covid and the election and they’re in a waiting-and-see mood. Wynn stated that people need to wait and see how inflation and taxes develop. “None are taking a position one way or the other that things are worse or better. That’s just my opinion.”

Altfest won’t recommend that an investor time the market, or be all in, but he has advised investors who are enjoying huge gains from stocks like Microsoft that they should sell their stock holdings. Altfest says this conversation has not always been successful.

“Lots of people are saying the market has been good to me and that is particularly true of people with growth stocks,” Altfest said, adding that a majority of recent gains in the S&P 500 have come from four technology companies including Microsoft.

If investors return to core stock analyses, they will find that the price-to earning multiples are a constant despite corporate profits increasing at a rapid rate. Altfest explained that PEs cannot grow for ever and it is very expensive.

Investors are left with a dilemma between holding market winners and worrying about the economic future. Alftest called it “barely bullish on stocks”.

President of the investment advisory firm ClientFirst Strategy Mitch Goldberg said that every time an investor tells them to “take some off the table in Apple or Microsoft… everyone who has told them that is wrong.” The key point is that it will eventually be correct. We don’t yet know when.

Goldberg said that an investor who does not make any changes to his portfolio in the current bull market for stocks or the weak return of the bond markets is simply holding on to more equity investments. Investors are slow to adjust after gains in specific asset classes. This can compound the problem of being more exposed to stocks. Goldberg added that most investors will continue to hold this stance.

He stated that there is no alternative. According to him, investors appear more skeptical than usual but are not taking any action. That is complacency. They are waiting for the bell to ring to be free to leave before the market crashes. 

Goldberg stated that older investors, such as baby boomers, who aren’t relying on market money for immediate needs and who have had a good record in equities, shouldn’t reduce their stock exposure. However, they need to consider reducing the number of stocks held. They have avoided the meme stocks or the pandemic stocks but they have increased the stock market value in other areas, including consumer staples, dividend stocks and core technology companies.

It doesn’t necessarily mean that you have to make major changes in your overall portfolio asset allocation plan.

Boneparth stated to him that “taking risks off the table” can refer to going from a 90-percent equity-10% fixed income to an 80%-20% split.

He said that investors should not be compelled to change from being “uber aggressive” to “just aggressive”, as this would make them feel uncomfortable.

He said that many investors commit the wrong mistake of exiting a market altogether. That “smart-money” strategy is often lost on them. Boneparth said, “These returns are so high above their historical mean it truly is always creating the question: ‘When will this correct?’

Let’s not let this get out of control. Boneparth stated that there is less risk than drastic changes and not only a decrease in the amount of risks, but also no additions.